It is that time of the year when Manhattan condo and co-op owners are getting updates from their management companies that building common charges or maintenance fees are increasing. Over the last few weeks, I have had some clients and friends reach out to me about their monthlies going up, including some who are on the boards of their buildings, like myself. (And yes, it is happening in my condo as well–our common charges are going up 6% this year.) I have been talking with them about steps they can take to mitigate the fallout that ensues and ways to explain some of the causes for the increases.
The questions I am most frequently getting are:
- “Is this normal?”
- “Is it my board’s fault?”
- “Is this my management company’s fault”
- “What can be done here?”
Let’s examine these questions below:
- Is this normal?
Insurance costs, taxes, cost of labor, and physical materials & equipment needed to keep a building’s systems operating and compliant are all going up due to inflation and increased regulations by the City and State. Unfortunately, all of this is due to larger economic factors at work around us that we are all subject to.
Your monthly maintenance for your co-op (or common charges for a condo) is affected by a variety of factors. For example, if your building has commercial space, that can pad your financials easing some of this burden. If your building has few units or shares, then each unit or share is responsible for a larger portion of any necessary increases. Buildings with an underlying mortgage can be subject to increases related to their mortgage rates. Looming capital improvements can be the cause of increases or assessments in buildings of all shapes and sizes.
According to the NY Post, “The increase in bills meant to cover utilities, labor and basic building maintenance jumped about 54% from the first quarter of 2020 to the third quarter of 2023, according to Bloomberg, citing data from Miller Samuel — 2.8 times more than the 19% increase US consumer prices experienced in the same period, per the Bureau of Labor Statistics.”
Also, according to a recent article in Brick Underground, “Multiple property managers… called 2023 the worst year in their memory for hikes. And 2024 isn’t looking much better. Three property managers expected to see increases between 3 and 6 percent.” In my opinion, incremental increases year over year, ~3%, are to be expected in pretty much all economic climates, however sometimes more is necessary to keep up with sudden increases in costs. So, is this “normal”? I’d say no, it’s certainly not “run of the mill” or regular, however it is understandable in the wake of the larger economic picture at play in the City.
- Is it my board’s fault?
The board and the management have a fiduciary obligation to their owners to do the right thing as it relates to the physical and financial health of the building. If you don’t think that your board is doing a good job, go to your shareholder or owner meetings, ask questions, and participate as much as you can. If you have expertise in an area that could help the board in their decision making, offer it if you’re able!
- Is it management’s fault?
Management may be the culprit, but it is good to take a deeper look before jumping to that conclusion. We recommend asking the managing agent to supply you with the most recent financial reports if you are concerned. As an aside, you should be provided the audited financial statements for your building annually. (If you are thinking about a sale, healthy financials are important when going through the due diligence process with a potential buyer.) Again, it always helps to be an active and helpful neighbor, attending board meetings to understand how your building is being run, and pitching in when you can.
- What can be done here?
Obviously, many factors can play into these increases, and it may not be one single item that is the cause. Speaking from experience of being on a board, it is frustrating when other owners make assumptions about things without seeking first to understand what is at play.
Be sure to ask questions before jumping to conclusions. For example, if the main culprit is the building’s insurance premiums jumping up (which is the case for many buildings), ask if management facilitated multiple quotes to the board for the new year, or if the board can seek them out. If the increases are a function of increased taxes for the building, your management can enlist the help of a tax certiorari to challenge the assessed property value.
If it turns out that unexpected increases are due to bad management, lobby your board (or, better yet, work to get on your board!) to help select a new company to run things more efficiently with the financial goals at the forefront of the decision making process.
If you’re on your board, be sure to be thoughtful and clear in your communication about these issues when relaying updates to your owners & shareholders. No one likes to learn that increases are coming, and some will be sour about it no matter what, but do your best to explain your decision making process and reasoning to your owners. Listen to their feedback, and try to help them understand that the increases are ultimately for the betterment of the building.
Of course, if you have any questions, please reach out to me at lauracook@kw.com.
